selvaraja somiah’s twisted thoughts

Me, just an ordinary Penangite who spent a good part of my learning life in North Borneo and Kathmandu. I’m a geologist turned freelance writer who’s joining the blog sphere now. What I post are my general views, my ramblings, and opinions of my thoughts of what is happening in my country. You are welcome to write your comments, but seditious and racial remarks will be deleted. I am no big writer but will try my best to provide my thoughts with my simple English. I welcome suggestions and opinions on my blog so that it can be improved further for the benefit of all.

A little inflation is not such a bad thing

Lopsidedness is a matter of perspective. Consider this: 35% of Malaysia’s disposable income comes from the top six cities. The bottom 1000+ kampongs account for 35% of income. Of the rest of the income, 30% is in the remaining hundreds of towns. These are what some marketing pundits euphorically call the Tier-2 towns, places with perceived potential for immense growth. Does this Tier-2 layer really exist?

This must be judged from the headline news — “Malaysia’s August inflation seen steady at 1.4%”, “Falling Inflation”, “Bank Negara and the Malaysian economists celebrate volubly”. Is this really worth celebrating for all?

I was recently touring Kundasang, home to South East Asia’s highest mountain – Mount Kinabalu, also South East Asia’s largest cabbage and broccoli market which I’m very familiar with, as I was one of the pioneers years ago doing experiments on pesticides and introducing hybrid cabbage and highland vegetable seeds from Taiwan and Japan some twenty years ago. I can’t say people of Kundasang would celebrate a fall in highland vegetables i.e. cabbage, cauliflower and broccoli prices. Hundreds of farmers are mourning the crash of prices, sometimes to even below the cost of production.

The cost of cabbages has fallen at the farm gate by over 50% over just 6 months! Overall, prices have deflated over 30%. But it will take years before they could go up again.

Unfortunately, the farmer is not treated like an investor whose money commands the headlines, and who reports farm level profitability. No farmer ever computes his ROI (return on investment) on the land that he owns. It is inherited and comes for free to cultivate.

If we were to cost up all farm level production based on the cost of fertilizers, insecticides, fungicides, weedicides, labour and land, everything will be ten times more expensive! Not many recognise this, but Malaysian agriculture is highly subsidised by the farmer who treats the cost of land as free.

Think about the positives of inflation for a moment. How many people know how inflation is computed actually? There are 435 articles or commodities across three major groups that are taken into consideration and given different weights. Milk has the highest weight (4.4), rice is (2.44), weights for all fruits and vegetables are less than that of milk.

This raises another question: how many times do the media complain about the cost of milk? Cabbages and most highland vegetables have a collective weight of 0.54, jagung (corn) even less (0.09). Then, why are corn prices more of an issue than cabbages? The Malaysian farmer would say that vegetables and fruits get unfairly low attention in the context of the perceived causes of inflation. I want to argue that farmers need inflation for a better living.

When I did economics as one of my first year papers in uni, as a student, I was taught that “a little inflation is not such a bad thing”. But how ‘little’ is little? The bigger issue is, 65% of Malaysia that lives off agriculture, will have to suffer from curtailed income due to deflation. And this clearly takes money out of the hands of semi-urban and rural people.

Would the Tier-2 story stand then with just 2% inflation? I would think not.

One also begins to wonder about the policy-making process and about those who are entrusted with the hallowed job of policy-making as well. Time and again, we have seen that Parliament is not where policy is made; it seems as though it is an arena where political parties stage their differences in acts of one-upmanship.

Policymakers are influenced heavily by three kinds of people: the man in the street types who just look at day-to-day gains and valuation; the politicians who do not understand economics when it is separated from politics; and the global investors who are at best opportunists and who treat Malaysia like a cell in a game of snakes-and-ladders.

The point is, good intentions of a few policymakers are not getting translated into ground reality at the farm level. There is too much media glare on produce prices than is required.

There is an urgent need for a fresh look at the needs of specific businesses in rural Malaysia, in terms of supply chain infrastructure, training and financial support. One size does not fit all. Individual ministries must debate thoughts and ideas with commercial businesses at the grassroots level, to understand the travails and opportunities.

Meantime, surely the dreams of Fast Moving Consumer Goods (FMCG) companies and other categories must be put on hold till the work performed by farmers in smaller towns and kampongs for their livelihood becomes profitable again. Some inflation is surely good.

Farmers in Kundasang are in distress without doubt, and farming is the only livelihood they have. But farming income is insufficient to meet all livelihood expenses, including social obligations. There is certainly no money left over for agricultural investments. Even then, given the hue and cry on land being rented to illegals mainly Bugis, it is not obvious that Kundasang farmers want to move off their land for better income prospects. Some form of commercial farming in partnership with farmers could improve their income, as is happening in pockets in Sabah. But continued resistance to reforms such as corporate farming and privatisation of various areas creates a massive investment gap. Farmers everywhere in the world are given subsidies, so there is no reason that ours should not. At the same time, incremental investment will not help – a massive transformation in the way we link agriculture to markets is needed. This will also help attract corporate investment into agriculture and only the government can do it.

Insightful post and thoughts. Since 1980’s (20yrs ago) very little has been done to alleviate the shameful condition of the vegetable farmers in Kundasang. The wastage and blighting inefficiencies of the supply chain and technology that supports (or doesn’t…) is very sad. So while the rest of world has jumped ahead, farmers in Sabah remains light-years behind, consigning the already poor to a life of continued, and possibly increasing poverty; where increased supply of goods could help tame inflation and spread more wealth, it instead feeds the needs of only those controlling access to resources.

It’s more important to share the cake rather than worry about inflation. In Malaysia, the business community does not share the cake with workers, consumers, the community, the Government, shareholders and investors. The level of profits reported by many companies — in the billions — shows the extent to which they are shortchanging workers, consumers, the community, the Government, shareholders and investors. The lifestyle of many politicians shows the extent to which they are plundering the people’s sweat from the Public Treasury and indulging in money laundering and other crimes in international law while sending the National Debt Burden up and enslaving future generations.